Chinese EVs are on the rise in South America, with sales increasing eightfold

Chinese automakers are increasing their presence in the Latin American market with pure electric vehicles (EV) and plug-in hybrid vehicles (PHV). In Brazil's new car sales from January to April 2024, Chinese cars increased to eight times the same period last year. As Europe and the United States are more vigilant about the influx of low-priced Chinese EVs, Latin America, which has deepened economic ties with China, has become the best export destination.

According to data from the Brazilian Automobile Dealers Association, new car sales (passenger cars and small commercial vehicles) in April increased by 37% year-on-year to 208,000 units. In terms of brands, the three giants, Fiat under Stellantis in Europe, Volkswagen in Germany and General Motors in the United States, accounted for 50% of the market share.

In Brazil, which belongs to the sphere of influence of European and American companies, Chinese manufacturers are quietly increasing their influence. In terms of the share of new car sales in April, three automakers, including BYD, Chery Automobile and Great Wall Motors, reached 7%.

Since the beginning of 2024, new car sales of Chinese manufacturers in Brazil have grown rapidly. From January to April 2024, the sales of new Chinese cars reached 48,000 units, an increase of eight times compared with the same period last year. The share in 2023 was less than 3%, but it is gradually gaining momentum in Brazil.

In Brazil, ethanol made from sugarcane and other materials is becoming popular, and cars running on flexible fuel mixed with gasoline account for most of the demand. Chinese companies are trying to open up the market through electric vehicles such as EV and PHV, which they are good at.

According to data released by the Brazilian Electric Vehicle Association (ABVE), the sales of electric vehicles (EV, PHV, hybrid vehicles (HV)) in 2023 increased by 91% from 2022 to 94,000 units, setting a record high. Among the top five manufacturers in terms of electric vehicle sales, three Chinese companies, including BYD, Chery Automobile and Great Wall Motors, have entered.

Antônio Jorge Martins, who specializes in the automotive industry at the Brazilian private think tank Fundação Getulio Vargas (FGV), said, "Latin America is at the dawn of EVs. Consumers are curious about advanced technology, and the middle class is buying them because they are affordable."

China is working to expand exports. Latin America is a huge market. From the total value of Chinese car exports to various countries (in US dollars) from January to March, Brazil ranked fourth and Mexico ranked fifth.

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The European Commission, the executive body of the European Union (EU), is investigating the Chinese government for allegedly providing subsidies and illegally hindering competition. The preferential policies for purchasing EVs in the United States are targeted at cars produced in North America.

Against the backdrop of the increasing possibility of Chinese cars being "banned" in European and American countries, the attractiveness of the Central and South American markets for China is relatively increasing.

Brazil has also begun to attract the automotive industry by targeting electric vehicles such as EVs and HVs, which are expected to grow in the medium and long term.

Although import tariffs on EVs were previously exempted, the measure was partially abolished from January. It is planned to increase tariffs in stages by 2026. Investment incentives for technologies that promote decarbonization were also introduced at the end of 2023.

In response to Brazil's new policies, Chinese companies plan to promote localization of production. BYD said in March 2024 that it would double its investment in its Brazilian production base to 5.5 billion riels compared to the original plan.

Brazil's first pure electric vehicle factory will start production as early as the end of 2024, and the annual production will eventually reach 300,000 vehicles. BYD also plans to double its sales outlets in Brazil to 200 by 2024.

Japanese automakers such as Toyota and Honda are also increasing their investment in Brazil, focusing on flexible fuel HVs.

Toyota will invest 11 billion riels by 2030. It plans to expand its plant in Sao Paulo State and launch a flexible fuel HV compact car from 2025. Honda also plans to invest 4.2 billion riels in Brazil by 2030. It will hire 1,700 new employees to produce flexible fuel HV SUVs.

As China increases its influence in the Latin American market, the United States has become more vigilant. Reuters and other media reported that after Brazil, BYD also considered local production in Mexico, but due to concerns about the influx of EVs produced in Mexico, the US government pressured the Mexican government to freeze subsidies for Chinese companies. The automobile trade friction between Europe, the United States and China has also spread to Central and South America. *Quoted from the Nikkei Shimbun